Chewy.com (A)

By: Matthew Preble and Jeffrey Rayport

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Synopsis: In late 2013, Ryan Cohen, cofounder and CEO of the fast growing online pet food and pet products retailer Chewy.com, has to make a "bet the company decision"-whether to keep working with Chewy's third-party logistics (3PL) provider to fulfill customer orders, or whether to take this critical function in-house. Cohen worries that the company's 3PL will not be able to serve Chewy's customers as it continues to grow, and reaching scale is essential to making the company's business model work, and to hitting the aggressive growth target that he has set of becoming a $500 million revenue company by 2018. However, some board members are concerned, and have suggested that Cohen slow growth and leave order fulfillment to the 3PL, as Cohen and the executive team are not operations experts; they are customer service experts, and that should be their focus. Cohen sees four possible paths for Chewy: stick with its current 3PL and slow down growth; add another 3PL to the mix to support Chewy as it scales; stay with its current 3PL and build out a fulfillment center in a new market to "test it out"; or fully "insource" order fulfilment, and open a fulfilment center as quickly as possible. Which path should Cohen and Chewy's board choose?